Looking at price action this past week on a 10-minute bar chart, we can see that the island that formed on Monday has continued to build as price is stuck in a trading range. The expectation is a breakdown that will be accompanied with a gap down. End of day price action finished with a PMO SELL signal below the zero line.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
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MAJOR MARKET INDEXES
SECTORS - New ITTM BUY for XLRE and back to ITTM Neutral for XLV
Each S&P 500 Index component stock is assigned to one, and only one, of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 5/8/2020
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: Yesterday's breakout brought price above the February top, but today's action pushed it back down below. Good news is that support could be found here at the 50-EMA and the bottom of the early month consolidation.
Total volume was actually a bit lower on today's drop which can leave bulls hopeful. The RSI is positive (barely). The VIX has now dropped below its EMA on the inverted scale which suggests internal weakness in the very short term. The PMO halted and was unchanged today.
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SPY Weekly Chart: You can see the island clearly on the weekly chart. The weekly PMO is trying to turn up but it is very overbought.
Participation: The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA).
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA).
- The Bullish Percent Index (BPI) shows the percentage of SPX stocks on Point & Figure BUY signals.
This chart improved as the BPI has a positive crossover and both the SCI and GCI are rising.
Despite today's downturn, we saw %Stocks indicators below continue rising which suggests there is participation under the surface that could support a rally.
Climactic Market Indicators: No climactic readings. Mixed message as New Highs fell, but Net A-D and Net A-D Volume was higher.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
We have very positive readings on the STOs. Unfortunately they are overbought. We've seen far more overbought readings before. Right now they are mixed with one rising and the other falling.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL. Both the ITBM/ITVM continue to rise and are in neutral territory. This is favorable for the intermediate term. However, if they decide to turn down before logging some positive readings, it won't be good for the market.
CONCLUSION: Short-term indicators are overbought but not extremely so. IT indicators are rising. There wasn't much in the way of damage to participation on today's decline. The island is still a problem, but with a few bullish indicators out there, I would normally expect to see mostly sideways consolidation. However, with the news swirling regarding the CARES package and the president testing positive for COVID-19, the market could be volatile. Volatility is rarely positive, so proceed with caution into next week.
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This chart is included so we can monitor rate inversions. In normal circumstances the longer money is borrowed the higher the interest rate that must be paid. When rates are inverted, the reverse is true.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The bullish saucer with handle formation implies that the dollar is heading higher. The clear line of resistance at 25.80 looks to be an obvious upside target, as well as a probable line of resistance.
UUP Weekly Chart: The weekly chart reinforces the rationale for the overhead resistance, showing the line going back to the 2017 price top.
IT Trend Model: BUY as of 3/24/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: With the dollar looking bullish, we assume that gold will suffer. Gold's short rally this week can be attributed to the formation of the "handle" on the UUP chart. There is horizontal, as well as rising trend line support in the area of 1800 to 1825. The daily PMO is at the one-year oversold limit, but it was not able to bottom.
GOLD Weekly Chart: The weekly PMO has topped, and a return to the rising trend line drawn from the 2019 low would put gold on a more rational angle of ascent, and pull the weekly PMO down from very overbought levels.
GOLD MINERS Golden and Silver Cross Indexes: Considering our outlook for gold, the miners will probably continue to correct.
CRUDE OIL (USO)
IT Trend Model: SELL as of 9/8/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Oil is now breaking down below September support. The PMO has turned down and is on a SELL signal. The RSI remains negative and not yet oversold. More downside is likely with $24 as the next support level.
USO/$WTIC Weekly Chart: The rounded tops are bearish. The PMO is still rising, but it is decelerating for a top well below the zero line which is very bearish.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: TLT has been trading in a thin trading range for much of September, but gapped down this week. RSI is falling and negative. The PMO just had a crossover SELL signal generate so while this looks like a possible bullish reverse island, the indicators suggest a test of support around $160.
TLT Weekly Chart: The recent breakdown looks rather ominous on the weekly chart as price is losing the longer-term rising bottoms trendline. The PMO is headed in the wrong direction.
Technical Analysis is a windsock, not a crystal ball.
Happy Charting! - Erin & Carl
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
NOTE: The signal status reported herein is based upon mechanical trading model signals, specifically, the DecisionPoint Trend Model. They define the implied bias of the price index based upon moving average relationships, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)